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Why Is Microsoft Setting More Money On Fire With Surface 2?
Nerval's Lobster writes "Never mind that sales of the original Surface totaled a pitiful $853 million in its first few months of release, or that the tablet failed to make Microsoft an up-and-coming player (or any kind of player, really) in the mobile-device wars: Microsoft's now rolling out Surface 2 and Surface Pro 2, which feature upgraded specs and accessories but no radical adjustments to the first generation. Why would Microsoft pour good money after bad? The answer could be outgoing Microsoft CEO Steve Ballmer, who late last year released a memo suggesting that Microsoft was evolving into a 'devices and services' company. 'There will be times when we build specific devices for specific purposes, as we have chosen to do with Xbox and the recently announced Microsoft Surface,' he wrote. 'In all our work with partners and on our own devices, we will focus relentlessly on delivering delightful, seamless experiences across hardware, software and services.' That meant Surface (then on the cusp of release) was clearly a harbinger of the company's future direction — and canceling the project after the first generation would have been a stinging refutation of Ballmer's strategy. By spending the money and resources on a second device generation, Microsoft manages to save a little bit of face, albeit at considerable cost. But imagine the hilarity that'll ensue if this second generation goes down in a huge ball of flames like the first."
Yes. It's called "Escalation of Commitment", and it happens in larger firms, too, and Government. Also with individuals. A good counter-example is HP ditching WebOS and now selling Android tablets.
Not annualized profits, where years have been profitable. Division lifetime profit. like this
One could easily have said the same thing about Microsoft Word. It was a copycat and it sucked compared to Word Perfect when it first came out.
WordPerfect lost because it botched the transition from character-mode to WSYIWYG GUI. And it botched this because of crappy and shortsighted management that thought Windows was a fad.
If anything, Microsoft's modern strategy with Surface is analogous to WP's errors: they came late to the party with a subpar entry, and expected to win because they won the last market.